A few years ago, Hertz learned that innovation isn't just a luxury to be taken out for a test drive now and then, but rather a business imperative. Without new ideas constantly in the pipeline, the car rental giant would get run over by its competitors.

"We get copied a lot," says CIO Joseph Eckroth. "Our competitors see [our innovations], and six months to a year later, they're introducing their own versions of it. Speed of thought and speed to market are absolutely critical for us to keep our lead. If we stop, we're dead."

Hertz isn't the only company that hears its competitors' footsteps and is relying on innovation to maintain its edge. Indeed, a loosening up of IT budgets and the race for competitive advantage in a post-recession world, coupled with a flood of new technology platforms, have created the perfect storm for business innovation.

According to Computerworld's Forecast 2013 survey, there's a sense of cautious optimism as IT organizations move into the new year. For instance, 43% of the 334 respondents said they're seeing an increase in their IT budgets, versus 36% last year. And 64% reported that they plan to make a major IT purchase or upgrade in the next 12 months, up from 60% last year.

But these days, innovators must play by a new set of rules. IT leaders find themselves taking a fresh look at project management and resource planning as they seek to accommodate business demands for speed to market while assessing a deluge of new tools driven by new technologies. Developing the "next big thing" requires fearlessness, a fast pace and a fascination with new ideas, not to mention reliable partners and an open-minded team of professionals who can imagine the possibilities -- a tall order in an often "command and control" IT environment.

Here's a look at how four IT executives have learned to "fail fast and move on" with innovation while maintaining a competitive advantage in a cutthroat marketplace.

Seeking the Ultimate Guest Experience in 'Lab Hotels'

The next time you visit a Hyatt hotel, you may be part of one of its experiments to improve the customer experience, perhaps without even knowing it. Hyatt Hotels and Resorts wants to reinvent the art of hospitality through technology. So it has identified eight "lab hotels" -- four in the U.S., four abroad -- where John Prusnick, director of IT innovation and strategy, leads major, "disruptive" IT experiments.

"We're not looking at just wanting to improve upon current solutions," Prusnick explains. "We're trying to come up with ideas that are transformative."

At any time, there are seven to nine unique projects under way at the lab hotels, and IT spends no more than 90 days on any one idea. Failure is definitely an option.

"Quite honestly, almost every idea fails fast. The solution we settle on relies on iterations of the original idea. Many times, perhaps as high as 60% of the time, we find that we revisit the original idea and find the solution to be something completely different," says Prusnick. The projects that don't make the big time are chalked up to "return on experience" rather than ROI, he adds.

IT Management Challenges

Show Me the Money

IT departments are developing creative ways to fund innovation projects -- from both inside and outside the company.

For instance, at Hyatt Hotels and Resorts, depending on the scope of the project, "we either get some funding from the hotel [where the project takes place] or we take corporate dollars and invest in those properties," says John Prusnick, director of IT innovation and strategy. The hotels are corporate-owned, "so we're not taking particular interest in an individual owner or franchise," he adds.

The hotel chain also works with third-party IT partners that "sometimes have brilliant ideas and wish to try them out," Prusnick says. "We give them a venue and opportunity to [try out new ideas], and they help to fund some of that effort."

One of Hyatt's most successful ideas emerged from the business side and was put to the test in a lab hotel. Hyatt International's president announced that the company needed to change the way guests check in. The Rooms Operations team, together with IT, decided to get rid of the front desks and make every associate a "host." The IT team created a mobile tool to untether front desk staffers and allow them to move about the lobby and interact with guests in a more personal way. The iOS-based iPad application includes hardware for credit-card swiping and encoding room keycards. The lab trial was so successful that the company decided to expand the mobile solution even further.

At the Hyatt Regency O'Hare in Chicago, mobile hosts are now stationed at the airport shuttle center, where they greet guests, check them in and issue room keys. "That has been a huge win for us from a customer intimacy standpoint," says Prusnick. "The guests feel like they're being greeted in a VIP way. They don't have to wait in line, so that saves them time."

As the keeper of Hyatt's major innovation projects, Prusnick's biggest challenge is making sure everybody realizes that they're all on the same team.

"Sometimes I feel like I'm stepping on other people's toes," he says. "Making sure that we can facilitate great cooperation between IT and the business can sometimes be a challenge." That's especially true when other departments come up with innovative projects on their own and Prusnick has to intervene to make corrections or stop the project until the innovation team determines if it's really needed.

"At the end of the day, everybody is looking for the best experience possible for our guests and [employees]," he says. "We all have the same goal. It's just a case of who gets to run it and be the project manager." In fact, all employees are trained in "Hyatt Thinking," meaning they're encouraged to come up with ways to improve existing solutions. "We're trying to introduce this culture of innovation," he adds. "That's everybody's job."

Partners = Speed to Market

The biggest banks are continually developing new services and payment applications. Speed to market and unique offerings are required to stay ahead of the pack.

At Capital One, Monique Shivanandan, senior vice president and CTO, relies on a new innovation lab team and trusted partners in the startup and university realms to bring new ideas to market fast.

In 2010, Shivanandan launched the Capital One innovation lab and staffed it with 20 "hard-core developers and product managers" in San Francisco and Washington. She then partnered with the FinTech Innovation Lab, a development organization that brings together New York area startups focused on banking applications, to tap into ideas and expertise from the outside. So far, the partnership is credited for new offerings such as Capital One's Mobile Deals app.

"It's been an incredible opportunity for both of us," says Shivanandan. "We've been able to get into the marketplace a little bit quicker because we have these relationships, and we've been able to help some very small companies really advance their agendas and frame the product or service so they're more realistic and more marketable."

She also partners with research groups at MIT, Georgia Tech and Stanford.

IT Management Challenges

Shaking Things Up

It's easy to create a technology wish list, but the devil is in the details, which could explain why some IT workers aren't enthused by innovation projects.

"The challenge for IT people is that we come traditionally from a lens of 'command and control,'" says John Prusnick, director of IT innovation and strategy at Hyatt Hotels and Resorts. "We want to have things standardized, lock them down and make sure they work. We want consistency in delivery, and we don't want to have changes introduced that will cause us grief down the road."

While empathetic to that viewpoint, Prusnick encourages IT staffers to understand the importance of continually trying to improve their products. "We want them to change to a more communicative and collaborative way and have dialogue with users on how they can improve their offerings," he says. It could be as simple as adding pictures to Active Directory, so people know who's sending an email, he adds. In the past, IT staffers would have balked at such an idea because it would create new infrastructure needs. But today, "they understand what the user needs to become more productive and effective," Prusnick says. "They will incrementally improve that product by implementing that feature or function."

Day-to-day IT responsibilities and the uncertainty of "experiments" can also limit IT staff's involvement in innovation projects. "There has to be some negotiations about how time can be made in a person's schedule for these workshops and to follow up on ideas," says Bob Krestakos, CIO at Steelcase. "But once you have a couple of ideas that really take hold that come from that innovation mentality, it gets easier and easier" to get IT employees involved.

At Hertz, CIO Joseph Eckroth doesn't try to fit all IT employees into the innovation mold. "Not everyone is entirely comfortable with the process by which we [innovate]," he says. But when it comes to the core innovation team, "you've got to hire and select people who have in their DNA the ability to create turbulence," he adds. "They question and [blend] the normal discussion with disruptive discussion. That's the type of people I want to have" in brainstorming sessions.

The lab works on just three to four projects at a time, and a steering committee made up of business and IT leaders meets quarterly to develop a list of promising ideas to work on in the next two to three months.

"If you have the product people sitting next to the developers sitting next to the testing folks, and you're all just working through it in a very rapid and iterative cycle, you will get something very good in 60 to 90 days," says Shivanandan. "It may not be perfect, but you will have such a good idea of what it is."

Sometimes, ideas that might have been scrapped by one business unit may turn out to be valuable to another part of the company. Capital One's team discovered, for instance, that a credit card project that was about to be killed was well suited for the small business banking group. Now in incubation, the project is a big bet for 2014, she says.

Not every project makes it to the finish line, and that's OK with Shivanandan. "A failure is sometimes the biggest success because you didn't spend $10 million finding out that it didn't work," says Shivanandan.

That's also one of the biggest challenges of leading an innovation team, she adds. "If you get one out of a thousand ideas implemented, that's a good rate. Just make sure that people on the team understand that not everything is going to be implemented, and that's OK. We've learned from that, but the individuals sometimes don't feel that way."

A Second Life

Sometimes projects fail fast and then sit on a shelf until technology catches up to the idea. For instance, in late 2008, Hertz tried to launch car rental kiosks similar to those used by airlines. "It failed pretty fast," Eckroth recalls. "Our process is so much more cumbersome than just checking in for your boarding pass and picking a seat. There are so many added things we want to sell, so it really didn't take off."

Hertz scrapped the kiosks by early 2009. Fast-forward to 2010, when an IT employee learned about a company that developed video integration technology. Team members surmised that if they used the new technology and worked with their key suppliers to put it together, they could create a more interactive, personalized kiosk that would solve the problems they encountered with the basic kiosk technology.

The new kiosks have two interactive video screens. When a customer picks up a receiver, a centralized customer service rep pops up and can complete the entire rental transaction remotely. The rep can even suggest optional services, print the rental agreement and give customers access to their car keys in a safe -- 24 hours a day.

In 2011, Hertz's new ExpressRent kiosks hit major airports and have since catapulted the company into new markets. "This has been a real game-changer," Eckroth says. "We have reduced line waits in most of our major airports and shaved peak staffing requirements. We can serve markets we weren't able to serve before -- we now have these [kiosks and rental cars] at hotels, body shops and parking garages in New York City."

A Method to Their Madness

Though ideas may run wild during brainstorming sessions, the process of refining a great idea into a workable plan usually includes a defined methodology.

Each quarter, the innovation management team at Steelcase, a workplace furnishings and services provider in Grand Rapids, Mich., convenes an innovation meeting with representatives of all areas of the business. The Innovation Management Office leader, who reports to the CIO, poses a single question to the group, such as "How do we create more efficiency in our manufacturing process?" He then uses a methodology developed by Palo Alto design firm IDEO to guide team members toward new ideas.

The methodology is the company's secret sauce for experimentation, says CIO Bob Krestakos. "IDEO is kind of our mentor in terms of design thinking methodologies," he says. "That methodology is applied to various areas of the business. It creates some of the ideas that we follow up on."

IDEO's philosophy is that virtually everyone has the capacity to innovate, but over time, people tend to lose their belief in their own creativity. Techniques such as defining problems through direct observation, developing empathy, encouraging people to come up with many ideas quickly, and fostering collaboration among colleagues with radically different viewpoints all help people regain their creative confidence.

The group comes up with three to five projects that they will work on for three to five months, depending on the experiment's complexity and promise.

The company recently found success experimenting with RFID technology as a way to improve its lean manufacturing model, says Krestakos. As the first deployment of the technology rolls out in North America, the company is developing prototypes of other RFID-based systems in an effort to find more applications. "It has really snowballed into something that I think can be really significant," he adds.

But Krestakos says it's important to balance innovation projects and other IT responsibilities. Otherwise, resource constraints on either end can cause conflicts.

"IT organizations have their own projects, commitments and timetables, and innovation can sometimes be seen as a distraction," Krestakos explains. "So we don't want to have too many things in flight from an innovation standpoint, but enough to keep us busy and thinking about what's possible."

In many cases, partners can help organizations bridge resource gaps. For example, Steelcase often enlists the MIT Media Lab and its more than 140 master's degree and Ph.D. student researchers to harness "outside thinking" and help Steelcase formulate hypotheses and conduct research that goes along with an idea, Krestakos adds.

Still, all Steelcase employees have the opportunity to come up with ideas and participate in experiments if they wish, and their enthusiasm for innovation work continues to grow.

"It's starting to feel like [innovation] is not just centered in one part of the organization. Anyone can participate," Krestakos says. "I think that's critically important to [building] optimism inside the organization."

For its part, Hertz seeks innovative ideas from all corners of the organization as a way to stay ahead in the rental car race. "We're making some big bets [on innovation], and that's exciting," Eckroth says. "If you're not willing to do that, you have to be willing to become a commodity and run in second or third place."

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